The mutation in the Z deficiency variant of alpha1-antitrypsin perturbs the structure of the protein to allow a unique intermolecular linkage. These loop-sheet polymers are retained within the endoplasmic reticulum of hepatocytes to form inclusions that are associated with neonatal hepatitis, juvenile cirrhosis, and hepatocellular carcinoma. The process of polymer formation has been investigated here by intrinsic tryptophan fluorescence, fluorescence polarization, circular dichroic spectra and extrinsic fluorescence with 8-anilino-1-naphthalenesulfonic acid and tetramethylrhodamine-5-iodoacetamide. These biophysical techniques have demonstrated that alpha1-antitrypsin polymerization is a two-stage process and have allowed the calculation of rates for both of these steps. The initial fast phase is unimolecular and likely to represent temperature-induced protein unfolding, while the slow phase is bimolecular and associated with loop-sheet interaction and polymer formation. The naturally occurring Z, S, and I variants and recombinant site-directed reactive loop and shutter domain mutants of alpha1-antitrypsin were used to demonstrate the close association between protein stability and rate of alpha1-antitrypsin polymerization. Taken together, these data allow us to propose a kinetic mechanism for alpha1-antitrypsin polymer formation that involves the generation of an unstable intermediate, which can form polymers or generate latent protein.